Obama Pitches New Plan to Help Middle Class

WASHINGTON - Parents, students and workers would benefit modestly from a series of initiatives President Obama outlined Monday for the middle class as he prepared for Wednesday's State of the Union address.

Seeking to point out some of the goodies in an otherwise austere budget, Obama and Vice President Biden said they will ask Congress to increase child care tax credits, cap student loan payments and help workers enroll in 401(k) savings plans.

The announcement came as two senior administration officials unveiled one of the more painful parts of the 2011 budget, to be released Monday: a three-year freeze on "non-security" spending that requires annual congressional votes. The officials with direct knowledge of the budget requested anonymity because it has not been released yet.

The freeze would not apply to defense, homeland security, veterans or foreign aid, whose budgets are expected to get increases, particularly to pay for the wars in Afghanistan and Iraq. Nor would it affect benefits such as Medicare, Medicaid and Social Security, which grow based on population and health care costs.

Nevertheless, the freeze will be unpopular in Congress, which approved an increase of nearly 10 percent in this year's budget. The two officials said Congress has averaged 5 percent increases for non-security spending since 1993.

The freeze would save $10 billion to $15 billion in the 2011 fiscal year that begins Oct. 1, the officials said. That's 1 percent of the $1.4 trillion annual deficit. If the freeze is implemented, it would produce $250 billion over the next decade, they said.

Programs that would be affected range from education and housing to transportation. Some will get increases and some will be cut, but the total will stay at or below this year's $447 billion for the non-defense departments, the officials said.

The middle-class package is meant to help people with higher incomes than in the past. The full child care tax credit, for instance, would benefit parents earning up to $115,000.

Student loan payments would be capped at 10 percent of income above what's needed to live on, and all debt would be forgiven after 20 years - 10 years if the graduate worked in public service. There also would be benefits for people who care for elderly relatives.

"None of these steps alone will solve all the challenges facing the middle class," Obama said, adding that he hoped they "will re-establish some of the security that's slipped away in recent years."